Thursday, November 16, 2006

Who's afraid of Vietnam?

Economic reforms pushed by Southern entrepreneurs have fueled an economy that's grown nearly as fast as China's over the last decade. Manufacturing jobs are plentiful, and the national poverty rate has plummeted from 57 percent in 1993 to about 18 percent today....[Vietnam] could become Southeast Asia's most important industrial economy in the coming decades, with the potential to surpass Thailand. This year alone, Vietnam is on track for $7 billion in foreign direct investment, roughly the same as giant India."...Often compared to China, Vietnam is actually more similar to Taiwan circa 1970, an economy then burgeoning with small and medium enterprises ready to burst onto the global scene.

A few weeks back Enda led me to this post from a Malaysian concerned about Indonesia's progress. It's was sad to realize that our advancement is seen with worry by others. I thought, "why couldn't we grow together?"

And now I'm in his shoes. As a fellow south-east Asian, I thought I should be proud of Vietnam's achievement, but I'm getting shivers instead. For example, I'm afraid that investments would keep going to Vietnam instead of Indonesia.

Apparently, developing countries' economic progress is also seen with shivers by free-trade protagonists of the developed world. Guardian's senior economics commentator, William Keegan, told the dilemma of "someone who had been a senior international official promoting free trade and open markets for many years." This person "had met an old friend whose previously successful US furniture business had collapsed in the face of the kind of international competition that he (the former official) had been busily promoting."

My dad once told me of a "negative" character common to the old people from our village that should be avoided: "happy to see others miserable, miserable to see others happy." But now it seems that such character is the dominant mindset.

I don't know whether I should be sad, happy, or just embrace this with a straight face.Pic source: Newsweek.

Enda, Your "media play" analysis makes sense. But there's got to be a good basis for the rosiness of the report in the first place.

Avianto and John,That's the question I'm asking. Is it possible for everyone to be happy when we live in a competitive world? I don't want Indonesia's (or any country's) progress to bring tears to others. Is this too naive?

"Is it possible for everyone to be happy when we live in a competitive world?"

it's a fallacy to think that countries "compete". that implies that one country's success comes to the detriment of other's -- which usually leads to protectionist trade policies, prolonging inefficient domestic industries...

David Ricardo (perhaps the greatest economist of all time) came up with the idea of "comparative advantage" which shows that countries always benefit from trade -- even if one trade partner is more efficient at producing everything.

economics has a very simple principle: allow ppl economic freedom and the economy will do very well (look at hong kong, perhaps the free trade capital of the world).

I'm happy to find a forum for people interested in the Indonesian economy. In fact, I'm trying to start a little monthly coffee meeting for econ students in my University (NC State Uni). Anyone interested to join us is welcome.

Anyway, NewsWeek is highlighting Vietnam because of Bush's visit to the APEC meeting. The timing is certainly media play, as well as the big highlight on how well the economy is growing.

It's true that everyone has comparative advantage, but many countries overlap. The US hasn't completely divorced itself from things that Vietnam (and Indonesia) are better at, so maybe what's good in Vietnam's economy is still interesting to US readers. Unfortunately, in the sense of 'miserable seeing others happy'.

John,How can we have competition without winners and losers? And if one is more efficient in producing everything, how is trade possible? The other can't just buy-buy-buy, without having to sell anything, right? Unless it's endlessly rich...

Nia, Happy to meet you as well. And thanks for the tips. There's a number of good quality blogs on Indonesian economy, by Indonesian economists. Some you can see in my links under "dev't, economics .."

this is off the topic. i'm visiting bangkok to do research about urban poor there, and i've been finding good links through your blog. i'm wondering if you have contacts there. can you please email me at d3wi.susanti@gmail.com. thanks!

Instead of afraid of "losing" from Vietnam, Indonesia should study what other developing countries -- i.e., China, India, Brazil, and including Vietnam -- have done right to advance their economies. Yes, FDI fell sharply the past eleven months (see here). But, as mentioned in the article, we also identified the roots of the decline. Let's fix them.

Indonesia also needs to stay the course in taking its medication ... no matter how bitter it is, and not toy with short-term distractions. To see what I'm talking about, see here.

Hi Sugi,Thanks for your references. I wonder if Indonesia's falling rate of FDI is related the lousiness of doing business here (as opposed to other countries in South East Asia, as these numbers show?And all the crap about KPK loosening up its tie is ridiculous. The fact is that there's still a lot of corrupt people out there waiting to get a chance to steal. And since we decided to go on a mellow "reform" than "revolution" in 1998, then that's the consequence. Change is going to be slow, with the pendulum moving from one end to the other, until it finally slows down and find a middle ground somewhere. What we can do is expedite the process of finding this middle ground.